5 carmakers settle complaint over lease ads Md. is among 23 states that will share $1 million

November 21, 1996|By John Rivera | John Rivera,SUN STAFF

Maryland and 22 other states will receive a total of $1 million from five automakers accused of improperly advertising "$0 down" auto lease deals, Attorney General J. Joseph Curran Jr. confirmed last night.

The Federal Trade Commission will announce today that it has reached an agreement with General Motors Corp., Honda Motor, Mazda Motor, Isuzu and Mitsubishi Motor, the attorney general's office said.

The five automakers were accused of violating FTC rules against deceptive and unfair advertisements, and of running afoul of the agency's consumer leasing regulations by failing to clearly disclose additional lease terms.

The agreement is designed to curtail the recent proliferation of ads promoting no-money-down leases or penny-down auto leases. Some ads, for instance, bury in the fine print a variety of requirements for initial fees. And some ads, the commission said, failed to express accurately the interest rate, while others did not fully disclose large payments due later in the leases.

"It involved deceptive advertising and very clearly a failure to disclose important information," Curran said. "But they've stopped it, and they've agreed not to do it again. And that's what we were looking for, really."

The automakers agreed to display all initial leasing charges as prominently as any statement about the down payment.

Other states said to be involved in the settlement are Arizona, California, Connecticut, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Massachusetts, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Tennessee and Washington.

The New York Times reported that negotiations between some companies and some states were continuing last night.

The FTC does not have the power to levy financial penalties, but the companies have agreed to reimburse the states for the costs of the investigation. Maryland will receive $50,000 to cover its expenses, Curran said. The automakers admitted no wrongdoing.

Maryland is one of 14 states that filed charges against Mazda last month alleging that the company "deceptively" advertised leases for "$0 down" or "a penny down," when in fact customers had to pay other costs. Those civil charges are still pending, the attorney general's office said.

Jay Amestoy, a spokesman for Mazda, said that the company had signed an agreement with the FTC and with a number of states. He also said Mazda had altered its advertisements in June, even though the company did not believe the changes were necessary. "We think we were in compliance and the one thing we are looking for is an industrywide solution," Amestoy said.

Honda and Isuzu officials had no immediate response to the commission's action, and GM officials did not return phone calls seeking comment. Mitsubishi declined to comment.